While it may sound like a good idea, there are some serious tax consequences when the corporation assumes ownership of your principal or secondary residence, summer cottage or vacation condominium.
The major difficulty arises if the business fails or is unable to pay its debts or taxes owing to the government. If this should happen, all assets (including personal or recreational residences owned by the corporation) can be seized by creditors or the government.
If the shareholder makes use of the properties, such use is considered a taxable benefit in the hands of the shareholder. CRA has been known to calculate this benefit based on return on investment, and this can be considerably more expensive than the fair market rent for the property.
There also are tax implications for the shareholder when the company sells the home. The proceeds from sale of property must be paid out in some manner (dividend, bonus or other form) that has a tax cost associated with it. But the biggest concern is that the sale of a home is taxable to the corporation – and it wouldn’t be if it was owned personally by the shareholders due to the Principal Residence Exemption. Food for thought.